State vs. Federal Exemption Choice

A bankruptcy debtor's exemption framework depends on state law. Some states require state exemptions; others allow choice between state and federal. This page covers the framework and the practical effect on debtors.

The two-state-tier framework

Under 11 U.S.C. § 522(b), each state can choose whether to allow its bankruptcy debtors to use the federal exemption scheme:

• Opt-out states have legislatively rejected the federal scheme. Their bankruptcy debtors must use state exemptions only.
• Opt-in states (or "non-opt-out" states) allow debtors to choose between state and federal on a case-by-case basis.

Approximately 41 opt-out states

Most states have opted out, including: Alabama, Alaska, Arizona, California, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Mississippi, Missouri, Montana, Nebraska, Nevada, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Utah, Virginia, West Virginia, Wyoming, and others.

In opt-out states, debtors must navigate state-specific exemption schemes that vary widely:

• Florida and Texas: unlimited homestead exemption (acreage-limited)
• California: choice between two state schemes (the "703" and "704" exemption sets)
• Kansas: protective homestead (160 rural / 1 urban acre, no dollar cap)
• Most states: dollar-capped homestead like the federal but state-specific

Approximately 17 opt-in states

States allowing federal/state choice include: Alaska, Arkansas, Connecticut, District of Columbia, Hawaii, Kentucky (limited), Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Pennsylvania, Rhode Island, Texas (special rules), Vermont, Washington, Wisconsin.

In these states, debtors typically run both calculations and choose the better outcome.

Domicile rules under § 522(b)(3)

The 730-day domicile rule controls which state's law applies:

• The debtor must have been domiciled in a state for at least 730 days (2 years) before filing to use that state's exemption scheme
• If the debtor moved within 730 days, the prior state's law may apply — the analysis turns on the 180-day-before-the-730-day window
• If neither rule produces a clear answer, federal exemptions are available regardless of state opt-out status

This rule prevents "exemption shopping" by moving to favorable-exemption states (like Florida or Texas) on the eve of filing.